Most business owners have a CPA and call that person to do their taxes, but don’t realize that their accountant can help them year-round. But working with your CPA at other critical junctures can ensure that your practices meet the IRS code and save you money in the long run, says David McClain, CPA, MBA, a manager in tax at SS&G.
“Many business owners want to get their tax returns filed and get it out of their minds for another year,” says McClain. “But there are a lot of options out there and a lot of ways that working with your CPA throughout the course of the year can save you money in the long run.”
Smart Business spoke with McClain about how creating an ongoing relationship with your accountant can benefit your business year-round.
How can a CPA assist a business in the implementation of employee benefits?
Employee benefits can be anything from tuition reimbursement to travel reimbursement, and it is very important to talk to a CPA about those programs before you implement them.
There are a lot of IRS rules surrounding employee benefits programs, and there may be some unintended tax consequences to your business if you don’t follow them.
Under IRS rules, there is often a maximum amount that is allowed to be reimbursed tax free to employees and certain rules under which a business can reimburse employees tax free.
If you set up your program without talking to a CPA, you may end up with a plan in which reimbursement becomes additional compensation, and therefore a taxable event to the employee. The result is that the employees will not get back the dollars that they initially thought they would.
A CPA can help you make sure that you are operating within the IRS code and that you are not unintentionally abusing the system.
How can a CPA impact a business’s banking relationships?
CPAs generally have relationships with several bankers, and they may be able to help negotiate better rates and terms with bankers they know, versus ones that you may be considering.
The other issue your CPA can help you with is understanding loan covenants and the potential audit requirements for loans.
When getting a loan from a bank, you may be required to meet certain covenants. A CPA can advise on whether it’s realistic to meet those covenants or whether you need to renegotiate.
The accountant may also be able to negotiate a requirement for a full-blown financial statement audit to a simpler financial statement and review, which is less work and costs the client less but gives the bank the reassurance it needs to offer that loan.
How can a CPA provide a benefit in the case of an IRS audit?
Any time you are facing an IRS audit, the No. 1 rule is never go into it alone. As soon as you get a notice saying that you’ve been selected for an audit, your first phone call should be to your CPA. That is important because when the CPA looks over the IRS audit request lists and talks to the agent for the first time, he or she is probably going to have a good understanding of exactly what the auditor is looking for.
The accountant is going to be able to navigate you though the audit rules and give the IRS the information it is looking for. If you can get the IRS the requested information and support the positions you’ve taken, you often get a ‘no change’ on the audit.
But if that doesn’t happen, you need a CPA to be there if it gets down to negotiations with the IRS or ends up in tax court. When dealing with the IRS, your CPA should always be your first stop.
Should a business owner wait until tax season to consult with a CPA on general business matters?
No. Too many business owners do that, and that is a mistake.
You really need to talk to your accountant in November or December. That’s a very important time. Even if you don’t think there is anything going on, that is the perfect time to sit down with your CPA and look at where you are for the year, what your business has done for the year and where you are in terms of income versus where you were last year.
Look at whether you need to adjust making estimated payments for the year and whether you are going to be covered on tax payments come April 15. This will give you an idea of what you owe so that you can plan your cash flow better.
You may be able to implement some ideas before the end of the year to save money.
Taxes are one of those tasks in life that people don’t want to deal with. They want to get their return filed and get it out of their minds for the year. But there are a lot of options out there, and calling your CPA when making business decisions can help you save money in the long run.
David McClain, CPA, MBA, is a manager in tax at SS&G. Reach him at (800) 869-1835 or DMcClain@SSandG.com.